Clarification by the Department of Commerce Regarding Previous Instructions for Allowing SEZ Units to set up Cafeteria, Crèche, Gymnasium, and Similar Facilities

The Ministry of Commerce & Industry, Department of Commerce, SEZ Division vide Instruction No. K-43013(13)/l/2022-SEZ dated October 03, 2023 issued a clarification on Instruction no. 95 dated June 11, 2019, allowing the SEZ unit to set up cafeteria, crèche, gymnasium and similar facilities.

I am directed to refer to the Instruction no. 95 dated June 11, 2019 issued by this department for allowing SEZ units to set up cafeteria, crèche, gymnasium and similar facilities in the premises of a unit for the exclusive use of such units under the proviso to Rule 11(5) of the SEZ Rules, 2006 subject to the condition that the unit shall not be eligible for any exemptions, drawbacks, concessions or any other benefits available under Section 7 or Section 26 of the SEZ Act for creating or operating such facilities.

The Department of Commerce received several representations stating that the Specified Officers are issuing notices for curtailing GST zero-rating benefit on lease rental services provided by developer to SEZ units on such portion of space which are utilised for creating such employee welfare facilities.

The issue has been examined in consultation with Department of Revenue and for the sake of clarity and uniform application of Instruction no. 95, it is hereby clarified that denial of benefits of zero rating on lease / other charges collected by the Developer from the units was never the intention of the said Instruction. Accordingly, the zero rating benefit continues to be available for lease rental/other charges collected by Developer from units for the space utilised for creation of employee welfare facilities exclusively for the employees of SEZ units.

The Instructions can be accessed at: https://a2z-bucket.s3.ap-south-1.amazonaws.com/wp-content/uploads/2023/10/Scan0996.pdf

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